U.S. copper mills are facing a crisis as traders take advantage of higher relative prices in the United States for refined copper.
The disparity between U.S. and global copper prices has raised input costs for domestic mills—which are indexed to the higher prices in the U.S.— relative to imports of semi-finished copper sheet, strip, plate, and bar, which are priced at the lower, global price.
Chinese state-backed overcapacity in copper smelting is flooding the global market with low-cost refined copper, depressing LME prices and further widening the COMEX–LME spread.
Relief under Section 232 of the Trade Act of 1964 is urgently needed, with a recommended compound tariff of 50% ad-valorem + $0.40/lb ($880/ metric ton).
Introduction
The U.S. copper industry—which is essential to national infrastructure, energy security, and defense readiness—is at a crisis point. The prospect of copper tariffs stemming from the Trump Administration’s announcement of a Section 232 investigation this past February has elevated U.S. copper prices—set by the COMEX—well above global prices—set by the London Metal Exchange (LME).
Speculators have responded to the arbitrage opportunity by purchasing lower priced, refined copper outside of the United States and flooding the U.S. market, where they receive a higher return. Refined copper is the principal raw material for copper mills (i.e. midstream copper fabricators making products like rods, plates, sheet, strip, wire, and tubes). Because there is very little domestic capacity for mined and refined copper, these producers are highly reliant on imports to meet their demand.
The pricing disparity between the COMEX and LME, otherwise known as the “spread”, has driven input costs for U.S. fabricators up, while also reducing their competitiveness in export markets, which are benchmarked to the lower LME price.
At the same time, heavy Chinese state-backed investment in smelting capacity—the process of refining copper concentrate into high-purity copper—has contributed to substantial overcapacity that is putting further downward pressure on the world prices of refined copper, while the domestic price remains elevated. While China’s overcapacity did not initiate the COMEX-LME spread—speculation around Section 232 tariffs was the primary trigger—it has amplified the distortion by further depressing LME prices through persistent oversupply.
The situation is placing U.S. copper fabricators in an impossible situation that demands immediate action.
Arbitrage Gone Wrong: The COMEX–LME Disconnect
Copper is unique in that it is the only industrial base metal that is globally traded on both a U.S.-based commodity exchange (the COMEX) and a foreign one (the LME). Historically, COMEX and LME prices have overlapped.
But since the announcement of the Section 232 investigation, the COMEX-LME spread has surged 105%. Correspondingly, arbitrage rates reached an unprecedented $0.81/lb on April 3, 2025 as the figures below show. To be clear, this trend is not driven by market demand, but for speculative gains.
Copper Imports are Flooding the U.S. Market
Traders have responded to the unprecedented arbitrage opportunity by flooding the U.S. market with refined copper. In April alone, the U.S. imported over 200,000 metric tons of refined copper—the highest monthly volume in more than a decade, as the figure below reflects.
In addition to the surge in refined copper imports, traders have been buying LME-priced copper and storing it in COMEX-approved warehouses—either to profit from a post-tariff price spike or to physically settle futures contracts. This speculative inflow has pushed U.S. copper inventories to a five-year high.
U.S. Copper Mills Are Getting Crushed
The COMEX-LME spread is crushing U.S. copper mills, faced with the twin challenges of soaring input costs and reduced competitiveness against imports with production costs benchmarked to the lower LME rates.
An aggravating factor is China’s aggressive expansion of smelting capacity. This has led to global overcapacity—so much that smelters are now competing for limited copper concentrate and, in some cases, operating at a loss. Refining fees have turned negative, meaning some smelters are effectively paying to process concentrate. This oversupply of refined copper is putting downward pressure on global copper prices, further lowering input costs for fabricators in LME-linked markets.
The upshot is that U.S. imports of semi-fabricated products—such as bars, rods, and profiles—have spiked since the Section 232 tariffs were initiated, as the figure below depicts. This is largely due to global producers benefitting from both lower input costs—which are benchmarked to the LME—and the ability to sell into the U.S. market where prices are influenced by the higher COMEX benchmark, giving them a significant pricing advantage over domestic mills.
Copper is Vital for National Security
Copper is indispensable to the future of American infrastructure, energy, and defense, making it vital for national security. The metal is needed in clean tech products like electric vehicles, solar panels, and wind turbines, as well as high-capacity data centers. To take one example, 16 gigawatts of capacity related to artificial intelligence data centers will require 4000,000 tons of copper at a cost of $3.2 billion.
However, the U.S. remains highly dependent on imports, which account for 42% of domestic refined copper consumption and operates just three domestic smelters. Further, it faces significant competition for resources from China, the European Union and the UK, who are undergoing their own industrial expansion.
China’s dominant position in the copper supply chain is an especially acute concern. In addition to commanding over half the global production of refined copper, they are also the largest exporter of semi-finished copper, representing 13% of global shares in 2024, as the chart below illustrates. Through state-backed subsidies, China is able to operate smelters at a loss and sell semi-finished products like bars, for example, at below the U.S. cost of raw materials. Moreover, during 2024, China’s average unit price on the copper it exported globally was 9% ($0.42/lb) less than that of the rest of the world according to Global Trade Tracker.
The Policy Answer: Compound Tariffs
The urgent concerns of American copper manufacturers can be best addressed under the Section 232 process using compound tariffs. This approach combines the protection of the more commonly known ad-valorem (AV) tariffs—which assign a percentage premium to the declared value of a merchandise import—and a specific tariff—which imposes a fixed duty per unit, weight, or volume.
In this case, a high AV tariff of 50% plus a specific tariff of $0.40/lb ($880/metric ton) to cover the COMEX-LME spread could provide immediate relief.
But we should also look beyond the 232 framework and explore additional measures, such as imposing an export ban on copper scrap exports to preserve a key raw material for midstream producers. In addition, the United States must make investments in domestic smelting and refining infrastructure to reduce import dependence.
If America fails to defend its copper industry today, it will lose the industrial backbone for tomorrow’s economy. The combination of speculative arbitrage, Chinese overproduction, and predatory pricing is decimating American copper mills. Strategic materials must be protected—not surrendered to global market manipulation.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Copper Crisis: Why the U.S. Must Act Now to Save Its Copper Industry
KEY POINTS
Introduction
The U.S. copper industry—which is essential to national infrastructure, energy security, and defense readiness—is at a crisis point. The prospect of copper tariffs stemming from the Trump Administration’s announcement of a Section 232 investigation this past February has elevated U.S. copper prices—set by the COMEX—well above global prices—set by the London Metal Exchange (LME).
Speculators have responded to the arbitrage opportunity by purchasing lower priced, refined copper outside of the United States and flooding the U.S. market, where they receive a higher return. Refined copper is the principal raw material for copper mills (i.e. midstream copper fabricators making products like rods, plates, sheet, strip, wire, and tubes). Because there is very little domestic capacity for mined and refined copper, these producers are highly reliant on imports to meet their demand.
The pricing disparity between the COMEX and LME, otherwise known as the “spread”, has driven input costs for U.S. fabricators up, while also reducing their competitiveness in export markets, which are benchmarked to the lower LME price.
At the same time, heavy Chinese state-backed investment in smelting capacity—the process of refining copper concentrate into high-purity copper—has contributed to substantial overcapacity that is putting further downward pressure on the world prices of refined copper, while the domestic price remains elevated. While China’s overcapacity did not initiate the COMEX-LME spread—speculation around Section 232 tariffs was the primary trigger—it has amplified the distortion by further depressing LME prices through persistent oversupply.
The situation is placing U.S. copper fabricators in an impossible situation that demands immediate action.
Arbitrage Gone Wrong: The COMEX–LME Disconnect
Copper is unique in that it is the only industrial base metal that is globally traded on both a U.S.-based commodity exchange (the COMEX) and a foreign one (the LME). Historically, COMEX and LME prices have overlapped.
But since the announcement of the Section 232 investigation, the COMEX-LME spread has surged 105%. Correspondingly, arbitrage rates reached an unprecedented $0.81/lb on April 3, 2025 as the figures below show. To be clear, this trend is not driven by market demand, but for speculative gains.
Copper Imports are Flooding the U.S. Market
Traders have responded to the unprecedented arbitrage opportunity by flooding the U.S. market with refined copper. In April alone, the U.S. imported over 200,000 metric tons of refined copper—the highest monthly volume in more than a decade, as the figure below reflects.
In addition to the surge in refined copper imports, traders have been buying LME-priced copper and storing it in COMEX-approved warehouses—either to profit from a post-tariff price spike or to physically settle futures contracts. This speculative inflow has pushed U.S. copper inventories to a five-year high.
U.S. Copper Mills Are Getting Crushed
The COMEX-LME spread is crushing U.S. copper mills, faced with the twin challenges of soaring input costs and reduced competitiveness against imports with production costs benchmarked to the lower LME rates.
An aggravating factor is China’s aggressive expansion of smelting capacity. This has led to global overcapacity—so much that smelters are now competing for limited copper concentrate and, in some cases, operating at a loss. Refining fees have turned negative, meaning some smelters are effectively paying to process concentrate. This oversupply of refined copper is putting downward pressure on global copper prices, further lowering input costs for fabricators in LME-linked markets.
The upshot is that U.S. imports of semi-fabricated products—such as bars, rods, and profiles—have spiked since the Section 232 tariffs were initiated, as the figure below depicts. This is largely due to global producers benefitting from both lower input costs—which are benchmarked to the LME—and the ability to sell into the U.S. market where prices are influenced by the higher COMEX benchmark, giving them a significant pricing advantage over domestic mills.
Copper is Vital for National Security
Copper is indispensable to the future of American infrastructure, energy, and defense, making it vital for national security. The metal is needed in clean tech products like electric vehicles, solar panels, and wind turbines, as well as high-capacity data centers. To take one example, 16 gigawatts of capacity related to artificial intelligence data centers will require 4000,000 tons of copper at a cost of $3.2 billion.
However, the U.S. remains highly dependent on imports, which account for 42% of domestic refined copper consumption and operates just three domestic smelters. Further, it faces significant competition for resources from China, the European Union and the UK, who are undergoing their own industrial expansion.
China’s dominant position in the copper supply chain is an especially acute concern. In addition to commanding over half the global production of refined copper, they are also the largest exporter of semi-finished copper, representing 13% of global shares in 2024, as the chart below illustrates. Through state-backed subsidies, China is able to operate smelters at a loss and sell semi-finished products like bars, for example, at below the U.S. cost of raw materials. Moreover, during 2024, China’s average unit price on the copper it exported globally was 9% ($0.42/lb) less than that of the rest of the world according to Global Trade Tracker.
The Policy Answer: Compound Tariffs
The urgent concerns of American copper manufacturers can be best addressed under the Section 232 process using compound tariffs. This approach combines the protection of the more commonly known ad-valorem (AV) tariffs—which assign a percentage premium to the declared value of a merchandise import—and a specific tariff—which imposes a fixed duty per unit, weight, or volume.
In this case, a high AV tariff of 50% plus a specific tariff of $0.40/lb ($880/metric ton) to cover the COMEX-LME spread could provide immediate relief.
But we should also look beyond the 232 framework and explore additional measures, such as imposing an export ban on copper scrap exports to preserve a key raw material for midstream producers. In addition, the United States must make investments in domestic smelting and refining infrastructure to reduce import dependence.
If America fails to defend its copper industry today, it will lose the industrial backbone for tomorrow’s economy. The combination of speculative arbitrage, Chinese overproduction, and predatory pricing is decimating American copper mills. Strategic materials must be protected—not surrendered to global market manipulation.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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